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Financially Free?

This FIRE com­mu­ni­ty rocks, y’all. There are amaz­ing­ly smart blog­gers who write some real­ly deep arti­cles that real­ly make you stop, think, scratch your head, think some more, write a com­ment at 5 am, and then enjoy some more think­ing.

Ms. Our Next Life is no excep­tion to this. She recent­ly post­ed an arti­cle on Why “Finan­cial Free­dom” Means Some­thing Dif­fer­ent to Me. I absolute­ly love it! I love that FIRE means some­thing dif­fer­ent to every per­son in the com­mu­ni­ty. Some want the extra sta­bil­i­ty in their lives to take risks with their cor­po­rate jobs, some want the choice to quit their W2 job to work a low­er pay­ing but more ful­fill­ing career, some want to quit and have more time with their fam­i­lies, and still oth­ers want to quit and trav­el the world for­ev­er.

I com­ment­ed this on the ONL arti­cle: “I’ll be stick­ing with finan­cial free­dom. It implies a cer­tain sense of won­der, light­ness, and awe to those not on the same path. Also, right now I’m not finan­cial­ly free. I’m in hand­cuffs, chained to my job. The hand­cuffs might be invis­i­ble, and com­fort­able, but they’re still there and chaf­ing at me. Yes we have it tons bet­ter than peo­ple in say, North Korea. There will always be peo­ple in the world I have it bet­ter than. There will also always be peo­ple who have it bet­ter than me! I wish every­one were equal but alas, our world isn’t set up that way :(“

Her reply: “I love the won­der part of your def­i­n­i­tion, but I do want to press you: Are you REALLY “hand­cuffed” to your job? You have tons of skills, and could eas­i­ly find anoth­er. ‘Hand­cuffed’ means you lit­er­al­ly have no choice, which clear­ly doesn’t apply to you. And you just bought a mul­ti­fam­i­ly home at a young age as a sin­gle per­son — that sure sounds like finan­cial free­dom to me. You made that choice — an auda­cious one, at that! — all on your own, and made it hap­pen through your own inge­nu­ity and grit. I can’t think of any bet­ter word for that than ‘finan­cial free­dom.’ ;-)”

Con­sid­er this my long-wind­ed response to her com­ment!

Not this bad of a sit­u­a­tion, though.

I absolute­ly do NOT con­sid­er myself to be finan­cial­ly free right now. I am in a great sit­u­a­tion, absolute­ly. But I have oblig­a­tions to meet and bills to pay. I have $150,000 squir­reled away in var­i­ous accounts. I also need to eat, put gas in my car, and pay my cell phone bill.

Right now I am still whol­ly depen­dent on my day job. Since I took relo­ca­tion ben­e­fits to move 5 months ago, I have at least 7 more months to go before I could quit my job and take anoth­er posi­tion else­where. Yes, I could poten­tial­ly get the new com­pa­ny to pay that for me. But what if I talked about the wrong thing to the wrong per­son and got fired? I’d be on the hook to pay that back before I could poten­tial­ly get hired at a new com­pa­ny.

I also bought my house. This means I have a mort­gage to pay. Yes, my ten­ants pay me rent which more than cov­ers the mort­gage. But that won’t always be the case as ten­ants come and go and I have to account for vacan­cies. I can’t depend on that mon­ey com­ing in, so I need to be sure I have a way to come up with the mon­ey on my own. I can’t do that with­out a decent pay­ing job right now.

I used a VA loan to buy the house. I have to live in this house for at least 12 months before I can move any­where. Tech­ni­cal­ly I could move and just not tell any­one but that’s uneth­i­cal. I will wait out the year to move.….. but that means if I were to get fired, I couldn’t move to a new loca­tion. Chances are high I wouldn’t be able to come up with a com­pa­ra­ble posi­tion in this town. Maybe I’m not doing the oth­er busi­ness­es in this town jus­tice, but it is a very small town ruled by my Mega­Corp. I would almost cer­tain­ly have to take a pay cut to stay in the area.

I’m not even sure I could thrive and excel in a new job. I have the tech­ni­cal skills on paper to get hired into just about any rel­e­vant job I want. I get recruit­ed on LinkedIn often enough to tell me this is the case. Add in the fact that I’m a woman in IT, and my chances get every bet­ter. I hate to have to use the diver­si­ty hire card, but if it helps open doors I’m not going to turn it down. How­ev­er.….…. my actu­al tech­ni­cal skills leave a lot to be desired. While it looks like I have the tech­ni­cal skills, I real­ly don’t. I am def­i­nite­ly bet­ter at IT stuff than your aver­age bear (or Baby Boomer), but I lack the log­i­cal way of think­ing to real­ly dig in deep and under­stand where the prob­lem is or how to improve some­thing. I’m much bet­ter at the user sup­port side of things.

This is gib­ber­ish to me.

Unfor­tu­nate­ly for me, sup­port posi­tions like mine are rare. Nor­mal­ly these posi­tions are con­tract posi­tions and paid very low to peo­ple just start­ing out in IT. Think your friend­ly helpdesk before it got shipped off to India. The only rea­son my job isn’t con­tract is due to the high­ly sen­si­tive and con­fi­den­tial nature of my day to day tasks. It’s so sen­si­tive we can’t even fill an open spot on the team to an out­side employ­ee. Find­ing an equi­table posi­tion in anoth­er com­pa­ny would take a lot of time and effort… that I might not have in the first place.

For­tu­nate­ly, I love my job and have no plans to leave, and def­i­nite­ly no plans to get fired any­time soon. All of this goes to show though, that while the tide is turn­ing for me, I’m nowhere near finan­cial free­dom yet.

I def­i­nite­ly have the cush­ion need­ed to take some risks (which I did when I bought the house) but I’m not finan­cial­ly free yet. To me, finan­cial free­dom is the same as finan­cial inde­pen­dence. I can take baby risks right now, but big risks like quit­ting my job and mov­ing to a dif­fer­ent loca­tion will have to wait until I have more mon­ey squir­reled away.

So if $150k isn’t enough for me to take big risks, what num­ber is big enough?

Hon­est­ly, I have no idea. I know I’ve set $587,500 as my FI num­ber but I’m think­ing as long as I have a steady income stream I won’t have to get quite that high before I can quit and do what I want. I’ll be almost half way there by the begin­ning of 2018! The high­er my num­ber and pas­sive income goes, the more com­fort­able I’ll feel tak­ing big­ger risks.

Until then, I con­tin­ue to stay the course! Onwards and upwards!

What’s your def­i­n­i­tion of finan­cial free­dom? Do you think I’m being too cau­tious?

I saw your com­ment and Ms. ONL’s response on the orig­i­nal thread, so I was excit­ed to read this reply! I appre­ci­ate where you’re com­ing from, but I think I align more with Ms. ONL’s take. But it obvi­ous­ly depends on one’s def­i­n­i­tion of “finan­cial free­dom.”

I just appre­ci­ate the sub­tle reminder that we are all free to take risks and make choic­es and we’re nev­er tru­ly stuck in any one sit­u­a­tion (or loca­tion!), so long as we are lucky enough to live in the free soci­eties that we (or, most of us read­ing this, any­way) inhab­it. For me, think­ing about it that way reminds me to be grate­ful, as well as to take respon­si­bil­i­ty for how my actions and deci­sions effect my future. There so many options open to us and I am opti­mistic about how our gen­er­a­tion, espe­cial­ly in the FI com­mu­ni­ty, is tak­ing advan­tage of that free­dom, and not just accept­ing the sta­tus quo as a giv­en.

Con­grats on hit­ting $150,000. That might be 1⁄4 of your goal but that’s sig­nif­i­cant­ly ahead of many oth­er folks. It also pro­vides many options. It might take a long time to reach FIRE but there are def­i­nite­ly stages of finan­cial free­dom along the way. Some are more sub­tle than oth­ers but you start to feel it more each day.Owen @ PlanEasy.ca recent­ly post­ed…Fac­tors That Could Affect The Size Of Your CPP

I’ve noticed the impact my month­ly con­tri­bu­tions make on my net worth is start­ing to mat­ter less than the mar­ket fluc­tu­a­tions now. It’s star­tling to real­ize I just lost a month of con­tri­bu­tions and real­ize I’m per­fect­ly ok! I think the snow­ball will real­ly start to grow here in a lit­tle bit!

I great­ly admire you for tak­ing the risks to move, get a new job, and buy a house. What I admire most is your con­fi­dence.

Ms. ONL’s take on hand­cuffs was very lit­er­al. I have no doubt if you lost your job you would find a way to make things work, but it might not be as opti­mal as your cur­rent sit­u­a­tion. The hand­cuffs still chafe a lit­tle but we all do things we don’t like 100% in sup­port of a goal. That’s called being smart. You don’t have finan­cial free­dom right now but it will come. How­ev­er you do have per­son­al free­dom and you’ve used that to your advan­tage.Mrs. Groovy recent­ly post­ed…That Time I Lied and Fake-Cried to Save My Fam­i­ly $1,000 in Air­line Fees

Thank you Mrs. Groovy! I like the take on per­son­al free­dom. I feel like I have a lot of per­son­al free­dom as a young, unat­tached lady. Take a vaca­tion to Ecuador? Just say when! No need to con­sult with any­one.…… just go! If that’s not free­dom I don’t know what is!

Well, we’re a bit in the same boat. We def­i­nite­ly have to stick with what were doing because we aren’t self sus­tain­ing quite yet.

But we’ve set up enough to take some risks and see where they go. Its kind of a weird crazy feel­ing that you can take some risks and be OK.

You might feel like you’re locked in. But real­ly you’ve set your­self up pret­ty well. If all that stuff comes to fruition, you’ll still be alright, might set back your goals some. But that’s the whole point, com­fort in the unknown and know­ing you can han­dle these uncer­tain events.

I don’t want to down­play how great a posi­tion I’m in right now. I’m aware of how incred­i­bly blessed I am to have this job, with this kind of pay, in this area. Not to men­tion find­ing all this FI stuff ear­ly in my life. The ini­tial dis­cus­sion was whether or not I was free to do as I wish. If I con­tin­ue this path, I will be.…… but not right now.

Haha, giv­en the name of my blog, you can tell I also love the term “finan­cial free­dom.” Sim­i­lar to you, it’s real­ly more finan­cial inde­pen­dence in tech­ni­cal terms. It’s the point at which we don’t need to make any mon­ey to sur­vive.

When we’d actu­al­ly retire might be slight­ly after that point, where we have enough cush­ion for our nor­mal stan­dards of liv­ing.Felic­i­ty (@FelicityFFF) recent­ly post­ed…4 Things You Should NEVER Do When Invest­ing

Today I got up before 5AM and ran 4 miles with my wife and some friends, planned to review some doc­u­ments for a con­sult­ing engi­neer­ing gig, then lunch with a friend, then ten­nis, then a retreat with the steer­ing com­mit­tee on the low income med­ical clin­ic I vol­un­teer with. But, because I am FI I blew off the engi­neer­ing stuff. I can do it tomor­row! My days are mine, I earn more than we spend just work­ing a cou­ple of days most weeks and I pick the days! Plus way more invest­ments than we’ll ever spend. It also leaves me time to help run a char­i­ty foun­da­tion, a local col­lege and my old uni­ver­si­ty engi­neer­ing depart­ment as vol­un­teer work. Life is good for us, it is a long path but it is so worth it.

The dic­tio­nary def­i­n­i­tion of free­dom is “the pow­er or right to act, speak, or think as one wants with­out hin­drance or restraint.” It doesn’t say any­thing about there being no con­se­quences when you choose to exer­cise your free­dom. So no, you aren’t hand­cuffed to your job. You are ‘free’ to quit with­out hin­drance or restraint, to decide to trav­el for a year, to find anoth­er job. So yes, in that sense you are free. Will there be con­se­quences to your plan if you decide to take advan­tage of your free­dom? Absolute­ly there will.

Fun­da­men­tal­ly, you are defin­ing free­dom in this con­text dif­fer­ent­ly from Mrs. ONL. Your def­i­n­i­tion is “I don’t need my job any more”, and that is a fine def­i­n­i­tion too.Mrs. BITA recent­ly post­ed…How To Make Mon­ey Despite Your­self

What a great descrip­tion! I love it. Yes, we are free to do what­ev­er the hell we want in the world.…. just as long as we’re pre­pared to deal with the con­se­quences after­wards! I am free to be a b*tch, but oth­ers are like­wise free to cut ties with me because of it!

If you’ve got $150k squir­reled away, why do you have a mort­gage? (Prob­a­bly b/c it’s in a tax-advan­taged account.) I hope you put down a big-enough down pay­ment to avoid PMI. Else try to make some sim­ple improve­ments to increase val­u­a­tion to increase equi­ty or watch the mar­ket care­ful­ly for increas­es above that.

My first rental was a four-plex and I lived in one unit. It felt good to have ten­ants pay­ing the mort­gage, etc. If you work it right, your hous­ing expense should be zero. This should lift a lot of the wor­ries about keep­ing your job at mega­corp. If you get sacked, you may have a bare larder, but you’ll at least have a roof over­head.

Like you said, most of my net worth is tied up in my 401k and there­for inac­ces­si­ble. I did how­ev­er, put down 10 per­cent on a VA mort­gage so I have no PMI to wor­ry about. I absolute­ly love hav­ing my ten­ants pay down the mort­gage for me. It is nice to know I won’t imme­di­ate­ly be home­less if I lose my job.

Bah! I think you’re doing spendid­ly. There are times to throw cau­tion to the wind, move to Thai­land, and shave your head, but this is not one of those times. 🙂 I don’t think there’s any­thing wrong with stay­ing where you’re at and fol­low­ing your plan.Mrs. Picky Pinch­er recent­ly post­ed…What a Fru­gal Week­end! May 7

And that is also the beau­ty of why every­one has it’s own inter­pre­ta­tion of finan­cial free­dom or inde­pen­dence. I tend to agree with both of you. But as long as you feel like you are not there yet, you aren’t. No one else but your­self is able to change that.

I have the feel­ing that your sense of finan­cial free­dom has noth­ing to do with a num­ber, but with the free­dom of hav­ing no restrains what so ever. Like a job.

What if those restrains weren’t there, and you haven’t hit on your tar­get num­ber yet? Would it still be pos­si­ble to achieve finan­cial free­dom already? Because then you could do what­ev­er you feel like? And although mon­ey still has to be earned, you could do it in such a way you wouldn’t feel hand­cuffed prob­a­bly. Or is it as Mrs. Bita says, and you just have a dif­fer­ent view on what free­dom means to you…

Great way of fig­ur­ing it out like this. Every­one should ask them­selves these ques­tion in order to define you own path to your own goals/targets!

EXACTLY. I don’t mind hav­ing a job as long as it’s some­thing I want to do/find fun/is ful­fill­ing. Most of the high­ly paid IT jobs out there do NOT fit this def­i­n­i­tion. I’ll be able to make the mon­ey work no mat­ter what.… if I know I have a healthy cush­ion to fall back on.

Nice job Gwen. I’m new so when my periph­er­al skimmed “$150,000” I imme­di­ate­ly thought neg­a­tive $150K (stu­dent loans etc.) Pleas­ant­ly sur­prised my read­ing abil­i­ties failed me! :p That num­ber is amaz­ing, amaz­ing (!!) espe­cial­ly for a mil­len­ni­al. You are well on your way. FI is in the bag, it’s more or less a when vs a how now.

Couldn’t agree more! I’m writ­ing a post about quit­ting the work­force before hit­ting 100% FI, because I am con­sid­er­ing tak­ing this route myself. Trini­tiy study shows that 4% of the time port­fo­lios fail with 4% rule. But the flip side to the coin is the fact that more than 50% of the time, those same port­fo­lios dou­ble. Which means about half the time, you have more mon­ey than you need, and could safe­ly pull more than 4% with­draw rate (small­er FI num­ber nec­es­sary).

I’m OK with tak­ing more risk to get out of my ‘hand­cuffs’ ear­li­er… con­sid­er­ing quit­ting my day job at about 85 — 90% of my FI goal. There’s a decent chance it will still be enough (espe­cial­ly if I have a small side hus­tle). Worst case sce­nario: I go back to work in a few years, prob­a­bly doing some­thing less stress­ful, pos­si­bly part time. My lit­er­al worst-case sce­nario is the rest of the world’s every-day sce­nario. I think I can live with that.Joel recent­ly post­ed…The Car Prob­lem

I am at €185k ($200k) net worth right now, and I am about half a decade old­er than you. I’ve made ter­ri­ble mis­takes on my way to FIRE. Sure, I will learn from these. It just sucks to know that I could be way ahead at €230–250k if I had just kept it sim­ple from the start.

In my par­tic­u­lar case there are oth­er chal­lenges ahead unre­lat­ed to the actu­al dough man­age­ment. How will my girl­friend digest all this FIRE sto­ry that she doesn’t know any­thing about yet? Will I reach FIRE at 43 years old if I decide to have three chil­dren?…

You seem to have every­thing bet­ter fig­ured out than I did at your age. Just keep it up and enjoy the ride!

“I hate to have to use the diver­si­ty hire card, but if it helps open doors I’m not going to turn it down.”

I’m going to pick on you a wee bit for this state­ment. I’m not sure if you meant it that way but I chal­lenge this view that the idea of hir­ing diverse­ly as a card or a tac­tic which also usu­al­ly comes with the impli­ca­tion that it doesn’t have inher­ent mer­it.

Your val­ue as a rareish woman in IT isn’t sole­ly the fact that you’re a woman and not a man, it’s that you have insights and per­spec­tives as a woman that most men tend not to have as a gen­er­al rule. It’s the lim­it­ed per­spec­tive that pro­duces results like Siri not rec­og­niz­ing what rape or sex­u­al assault is and being unable to direct the user to get help.

You’re valu­able because of your skills and as a whole per­son who would rec­og­nize prob­lems that are unique to women. We are rather an impor­tant half of the pop­u­la­tion, after all. You deserve a seat at that table, and frankly, we need you there! 🙂

As to your finan­cial free­dom — I can’t call you over­ly cau­tious when I’m equal­ly cau­tious. I’ve nav­i­gat­ed too much finan­cial ruin to not be. It leaves a hell of a mark. But I like defin­ing free­dom as being able to make choic­es with­out neg­a­tive con­se­quences a lot!Revanche @ A Gai Shan Life recent­ly post­ed…Just a lit­tle (link) love: love music must dance edi­tion

I’m blush­ing. Thanks for all the kind words, Revanche! I have worked incred­i­bly hard to get where I am. I know I earned every­thing I’ve got. But. At the same time, I also won­der if I would be so suc­cess­ful as a man. If I were a guy, I would’ve had a much hard­er time get­ting hired that first time for my intern­ship. I don’t think being female has hurt my case any. If any­thing, it’s only helped me, because you’re right, we do need more women in STEM careers.

I’ve loved fol­low­ing folks’ respons­es here, in addi­tion to hear­ing your take. You know I’m a total fan of defin­ing this stuff for our­selves, so right on for cre­at­ing your own def­i­n­i­tion of finan­cial free­dom. The only thing I think is worth think­ing through is my huge belief that think­ing of our­selves as “not free” puts us into a scarci­ty or deficit mind­set, while if we see our­selves as free, we shift to an abun­dance mind­set. In my view, you unques­tion­ably have abun­dance — an abun­dance of options most of all (even if you can’t leave your job right this sec­ond, you can in pret­ty short order in the grand scheme of things), and a huge cush­ion of safe­ty (your renters and their rent, your sav­ings, your retire­ment accounts if things got bad, plus I assume cred­it cards if things got REALLY real­ly bad). So it just feels a tiny bit sad to me to see your­self as “trapped” or “chained to your desk” when in truth you have vast­ly more options than 99% of the peo­ple on the plan­et. That feels like some­thing to cel­e­brate!

Thought­ful post. I think you are finan­cial­ly free but have a long-wind­ed way of describ­ing why. My younger sis­ter hates talk­ing to me some­times because any time she tells me she feels stuck, I reply with “well, here is how you could get out of that sit­u­a­tion by doing XYZ. You’re not actu­al­ly stuck” or when­ev­er she com­plains about some­thing that seems so insignif­i­cant in the scheme of things, I reply with, “that’s a first world prob­lem, not a real prob­lem. You’ll be OK.” I am try­ing to be help­ful and pro­vide perspective/solutions (it’s who I am) but she hates that. She just wants empa­thy like a nor­mal per­son. I am clear­ly a jerk, but this com­mu­ni­ty has changed me and I tend to agree with Mrs ONL that many of us are com­ing from an abun­dance of options and we are in a more priv­i­leged posi­tion com­pared with many folks. We are also fight­ers and we refuse to accept that we can­not change our sit­u­a­tion or direct­ly improve our out­come. It’s hard to hear oth­er peo­ple be in a place where they feel stuck or finan­cial­ly trapped because I don’t believe it. My sis­ter has taught me though, that I need to respond to peo­ple with empa­thy and put myself in their shoes because they are expe­ri­enc­ing feel­ings of being trapped and that is what is impor­tant — how they feel. So any­ways this is a long-wind­ed way of say­ing that if you are feel­ing finan­cial­ly stuck, I sup­port you and empha­size with you. I am not hear to tell you that feel­ing is fake.Mil­len­ni­al Boss recent­ly post­ed…25 Quotes for Lady Entre­pre­neurs and Badass Women

I’m back. This is one of those posts you think about all day ha! Great job. Relo­ca­tions are total­ly trap­ping and I expe­ri­enced this first hand. So in that case, one would not be finan­cial­ly free.

I agree with you, it’s finan­cial­ly smart to work towards your next two mile­stones for the ethics of a VA loan and the relo­ca­tion pay­back. Let’s call those “soft ropes” and not hand­cuffs. Sure you could move, but it would hurt.

I’m in a sim­i­lar posi­tion, 7 months away from a relo­ca­tion pay­off and my house gains being tax free (and I will GTFO of Dal­las when I retire). But I look at that and real­ize there are always ropes and “gold­en hand­cuffs”, if I work 3 more months, is bonus and stock time, then anoth­er three more and I hit a pen­sion year, then anoth­er 9 months and it’s a real­ly big stock/bonus, then anoth­er pen­sion year, and on and on. These are 100% first world prob­lems, but we all must make a deci­sion on if/when/how we trade time for mon­ey. Your job/career/side hus­tle is a con­stant trade of time for . Each of us must make that per­son­al deci­sion of how we val­ue mon­ey rel­a­tive to time.

I agree with you on this one, Gwen. I don’t know your whole finan­cial sit­u­a­tion, but as a very inde­pen­dent per­son myself, I wouldn’t feel “finan­cial­ly free” until I reached my FI num­ber. Buy­ing a house and hav­ing the mort­gage cov­ered is nice, but I’m assum­ing you still aren’t able to just quit your job and have all your expens­es paid for. For me, being finan­cial­ly free is when you can quit your job and trust that your expens­es will be paid for by either the mon­ey you’ve invest­ed or by oth­er income streams.

I also think that some­times we have the “hand­cuffs” on for so long that it still feels like they’re on even after they’ve been tak­en off. So it’s def­i­nite­ly impor­tant to look down every once in awhile and check how “impris­oned” we real­ly are. As you get clos­er and clos­er to your goal, hope­ful­ly you feel more free as you gain the lee­way to explore oth­er options you didn’t have before.

I think it is more a mat­ter of per­spec­tive than of encour­ag­ing you to do some­thing else. Stud­ies have shown we can han­dle a lot more pain when we know we have an escape but­ton. It is about think­ing of your job as some­thing you choose than some­thing you have to do. It reminds me of going through col­lege. I made it through remind­ing myself that it was some­thing I chose. That I was free to make dif­fer­ent choic­es, and if I was mis­er­able it was all in my pow­er. If I didn’t like the con­se­quences of the alter­na­tives then I need­ed to put on my big girl pants and keep push­ing down the path I chose. But the choice was always mine. I was nev­er trapped. All of your rea­sons are sound, but how you list them comes across as a lit­tle defen­sive to me. And since it all starts with a job you enjoy, even if you don’t love it, I’m also hav­ing a hard time with the men­tal­i­ty com­ing through. It’s like you know you’re lucky, but you feel trapped and you are try­ing to jus­ti­fy that feel­ing. The alter­na­tives might not be ide­al (that’s why you don’t choose them) but they are THERE.